Withdrawing from a pension at 55

Submitted by randumdooode t3_zzxpik in personalfinance

I have an long forgotten SERPS pension that I can access at 55. It's my only pension plan. It's currently worth 120K. I'd like to withdraw 25% tax free at 55 and then leave the rest invested to use when really needed. The pension provider says it a bad idea to do it at 55 even when they offer me the option to do it? I'm not sure if I trust them tbh.

I have an appointment with a financial advisor in the new year but I'm curious to run it by this sub. What do you think?

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HorizontalBob t1_j2e6hyu wrote

Do you currently have other sources of income? Do you have other retirement accounts? What do you want to do with this money?

There's a lot of details in a decision like this one.

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randumdooode OP t1_j2eel6f wrote

I do work part-time. I own my own home. I do have a similar amount in fixed rate bonds. I would like to gain access to the pension and take control of it.

I would like to travel for a few years whilst I'm still in good health. The maturity date of the pension is 67 years old. Who knows if I'll still be alive then and what my health would be like if I am.

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0000GKP t1_j2ea65p wrote

> The pension provider says it a bad idea to do it at 55 even when they offer me the option to do it? I’m not sure if I trust them tbh.

It’s a bad idea if you don’t need the money today because that is $30,000 that will no longer be in the account gaining value. It’s not necessarily a bad idea if you actually need the money for a specific purpose and there are no penalties for withdrawing it.

Considering you want to withdraw 25% and not a specific dollar amount makes it seem like you don’t need it for a specific purpose, so bad idea.

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PetraLoseIt t1_j2eje8b wrote

> The maturity date of the pension is 67 years old.

So I'm not sure what exactly the consequences are of "reaching maturity", but I'm guessing it means that if you take money out now, you lose out on having much more money later on. This might be a reason why the pension provider advises against it.

Another reason could be for people who have a high income now (because they're still working) and who will have a lower income later. If you take a distribution in a high earning year, you'll probably pay way more taxes on the distribution than if you had waited until a low income year.

Third, you may need this money much much more when you're in your 70s than you do now.

Finally, it could of course be that the fact that it is also in their own best interest to advise you to keep your money safe with them plays a small role.

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shadow_chance t1_j2f76qt wrote

Not sure what specifics of your plan are, but the provider is probably saying it's a bad idea because now you have less money invested or earning interest.

Is this a UK thing? I can't find an American reference to SERPS so people here will likely be unfamiliar with UK retirement systems.

> even when they offer me the option to do it?

You can do lots of things, doesn't mean they're a good idea.

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